Stocks, Precious Metals Spike On Report Fed Considering "Sterilized" QE

Submitted by Tyler Durden on 03/07/2012 11:17 -0500

• Bond
• Crude
• Precious Metals

Update: yup. It's Jon "Mouthpiece" Hilsenrath all right. This is nothing but a test to gauge if the market will ramp on the clarification that future QE may be sterilized. If market ramps regardless, the sterilized clause will be ultimately eliminated. Full story link.
While we have yet to see the actual report, almost certainly emanating from Jon Hilsenrath, it appears that the QE3 rumormill has started, initially with speculation that the Fed's activity will be merely "sterilized" or more Twist-type purchases, unclear however if in TSYs or also in MBS. Via the WSJ:

• Fed Officials consider "sterilized" option for Future bond buying
• Operation Twist Reprise, QE Other Options For Fed Bond
• Still Unclear Whether Fed Will Launch Another Bond-Buy

As a reminder, yesterday we said that according to the EURUSD, the implied market expectation is for a $750 billion QE. However, that is for sterilizied balance sheet expansion. If the Fed goes ahead and does not grow its balance sheet, it may well be EURUSD, and thus risk, negative, as no new money will be available for actual speculation. Which perhaps is precise ly what the Fed is planning, as every incremental dollar now goes into Crude first, and everything else later. In other words: this is a very big risk off indicator as no new money will be availble to pump up stocks!
This move may have to be faded: